Use the Information for the Question(s)below

question 54

Essay

Use the information for the question(s)below.
KD Industries has 30 million shares outstanding with a market price of $20 per share and no debt.KD has had consistently stable earnings,and pays a 35% tax rate.Management plans to borrow $200 million on a permanent basis through a leveraged recapitalization in which they would use the borrowed funds to repurchase outstanding shares.
-Assume the following tax schedule:
Personal Tax Rates

Considering the effect of personal taxes,calculate the PV of the interest tax shield provided by KD's recapitalization in 2005.

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Definitions:

Grand Rapids Lettuce

A variety of lettuce known for its crisp texture and resistance to diseases, often used in salads and other dishes.

Phytochrome

A photoreceptor protein in plants that absorbs light and mediates various growth and developmental processes.

Phytochrome

A pigment found in plants that absorbs light and is involved in regulating plant development, such as seed germination and flowering.

Germination

The process by which a plant grows from a seed or similar structure, often requiring specific environmental conditions to initiate.